Fee-for-Service or Indemnity Health Insurance

This is the traditional kind of health care policy. It offers the consumer the most freedom when it comes to picking hospitals, physicians and other healthcare providers. It is also understandably therefore, the most expensive type of insurance. In an Indemnity plan the insurance companies pay fees for the services provided to the insured. There are no restrictions on who the insured can see for covered medical expenses anywhere in the country. These are the types of plans that primarily existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance provider will pay the rest. For example, an individual might pay 20 percent for services and the insurance company pays 80 percent.
With fee-for-service, the insurer pays part of your doctor and hospital bills –once your deductible is met. You are still responsible for a monthly premium, the deductible and coinsurance.

The premium is the monthly fee you pay for insurance coverage –usually the higher the deductible the lower the premium.

The deductible is the amount of money in a given calendar year that you or the members of your family need to go “out-of-pocket” until the insurance “kicks in” and begins to make its payments for your healthcare. In a typical plan, the deductible might be $250 for each person in your family, with a family deductible of $500 when at least two people in the family have reached the individual deductible. Keep in mind that not all of your health expenses count toward your deductible - only those that are covered by the policy do. You need to check the insurance policy to find out which ones are covered.

Once the deductible is met, the insurance company will pay most but not all of covered medical expenses - you share the bill with the insurance company. For example, you might pay 20 percent while the insurer pays 80 percent. Your portion is called coinsurance.

With a traditional indemnity plan you are responsible for a lot of the paper work and cord keeping. You will need to keep accurate records of and receipts for drugs and other medical costs to know when deductibles have been met. In order to receive payment for fee-for-service claims, you may be required to fill out forms and send them to your insurance company – in some cases the doctors office will accept your copay and send in these forms for you.

On nice thing about fee-for-service plans is that most of them have a “cap”. That means there is a ceiling on the most you will have to pay for medical bills in any given year. You reach the cap when your out-of-pocket expenses both when reaching your deductible and your coinsurance payments add up to the “cap” amount. It may be as low as $1,000 or as high as $5,000 –but once the ‘cap” is reached you will no longer need to pay anything out of pocket - the insurance company pays the full amount in excess of the cap for the items your policy says it will cover. You premium is not factored into reaching the “cap” amount only your copays and payments against your deductible amount

Fee for Service plans are flexible and as such very variable – they can be tailored to your specific needs but you must be clear on the policy you are purchasing – the can be unexpected limits on your coverage and some service may not be covered at all. You need to check on preventive health care coverage such as immunizations and well-child care.

There are two kinds of fee-for-service coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and care while you are in the hospital. It covers some hospital services and supplies, such as x-rays and prescribed medicine. Basic coverage also pays toward the cost of surgery, whether it is performed in or out of the hospital, and for some doctor visits. Major medical insurance takes over where your basic coverage leaves off. It covers the cost of long, high-cost illnesses or injuries.

We can help you pick a plan that is right for you but only you can decide if you need one or the other or both. Some policies combine basic and major medical coverage into one plan. This is sometimes called a "comprehensive plan." Of course it will be more expensive, but will provide complete coverage for you and your family.